The monthly payment you're paying is the loan payment you take from Maybank. The divident you get in January every year is given by ASB (PNB), so they are separate.

When people say use your divident to pay loan, what they mean is that you have the option to take out the divident money every month, and pay it to your loan account. But you will have to initiate this yourself. Of course you can also take this divident money and go jolly, while pay off monthly loan using your salary.

Whether or not you can transfer ASB divident to your bank account via online, that you have to check with your bank. Same goes to if you want to double confirm that your 100k ASB cert is there. Banks dont lie, if you get your loan contract then it should be there. Note that when you borrow 100k, you dont borrow cash as in real cash. What you get is a 100k ASB cert parked under your ASB account to earn dividents.

PNB used to allow an individual to take up ASB financing up to 400k (if their ASB limit is maxed to that amount), but a few months ago they decided to limit the allowed financing to only 200k per person. You can still put in cash exceeding 200k though. So people who already have 400k loan for ASB did it before the rule came into play.

This post has been edited by exitsortie: Nov 22 2015, 11:48 AM

As other people on this thread had mentioned, you are now allowed to take up ASB2 financing (also up to 200k). So if you have enough 'capital' for another 200k, dont waste time feeling disappointed and go grab these loans now

Just to add to what buggie had said,

Using his numbers with assumptions of 7%+1% divident, the methods are:

1. Pay only 1 year : Capital = 14.4k, Profit = 185.6k, Return = 1300% over 30 years, CAGR = 9.16%
2. Pay for 30 years: Capital = 432k, Profit = 1100k = Return = 254% over 30 years, CAGR = 4.31% (using year = 15 since payment is made every year up until the 30th year, not lumpsum at the start.
3. Save without loan 1150/month for 30 years: Capital = 414k, profit = 960k, Return = 232% over 30 years, CAGR = 4.07%(using year = 15 since payment is made every year up until the 30th year, not lumpsum at the start.

You will notice that if you service your loan faitfully for 30 years, you WILL get more money compared to saving monthly without loan (140k more), but some people might not be attracted by that number since the loan can take up your DSR quota.

If you only service for one year, your CAGR is much higher (more than twice), but since your capital is small (only 1st year payment), your final value also small.

At the end of the day, it depends on what your objective is. if you want to hit the 1M mark as soon as possible, use method 2. if you want to maximize your return, use method 1. With method 1, theoretically you have RM1150*12month*29 years extra cash compared to method 2 that you can either jolly or put in a higher return investment, so there's possibility for both win/lose.

This post has been edited by exitsortie: Nov 24 2015, 06:02 PM

yeah you are right, i did not take into account that limitation. The amount we can deposit definitely depends on the limit, which only grows by approximately...100k after 15 years? just a rough estimate.

I dont think that's possible. When you get the first 50k loan, your insurance is for that 50k. Getting another 50k will require another insurance for that 50k.

By the way, there are banks that offer ASB loan with no insurance, or at least shorter insurance period (e.g. 5 years), try ask around. Unless they already stop the ASB loan and only sell ASB2 loan.

Think about it, if you borrow 100k today for 30 years, and some time during the tenure you suffer from death/TPD and defaulted on your loan, the bank could easily resell the certificate for 100k to PNB, and even return you some of the excess money.

The reasons why some banks require mandatory loan is because either:
- they get commissions out of selling the insurance AND
- assuming the borrower suffer from death/TPD some time during the tenure and defaulted, it's true the bank can resell the certificate and get back their money, but the loan will still be considered as a non-performing loan because the best case scenario for the banks is for you to continue paying for 30 years, thus they get to collect maximum amount of interest.

I applied for CIMB LASB in june and was allowed to take a 5-year insurance, you might want to check with them. YMMV though.

Yeah at first the loan officer said a full-term insurance is required, then i mentioned about people who were able to get shorter insurance from CIMB. A few hours later the loan officer called back and said it's ok to take 5-year insurance. So i guess we can say they begrudgingly allowed me to take shorter insurance.

One thing to remember, insurance is not necessarily a bad thing. It's definitely a good thing if you suffer death/TPD during the tenure. But I applied for the ASB loan with the aim to maximize my capital, not protection. I do plan to terminate before the 30-year term is up which means i dont need a full insurance, but even if i ended up not terminating and suffer death/TPD during my unprotected years, i'm fine with it. If my family cant pay for it, i'll just terminate the loan and the bank can resell the cert. In short, i wanted short-medium term profit against long-term protection.

I'm interested in that CIMB 5%/30years/optional insurance plan. What is the offer letter/family link referring to?

Hi friend,

Let me enlighten you on how people use asb loan to maximize their roi.

For example, take a 50k loan with no (or minimal) insurance at 5.2% and 30 years - monthly payment of $275.

Assuming after 1 year you get 7.25% divident (ignore bonus),

You have paid = $275*12 = $3300
Your divident = 7.25% * 50k = $3625
Your profit at this time is already = $325

Now assuming you terminate the loan after getting the divident, you will get back the principal paid over that 12 months amounting to $710.

So you total profit = 325 + 710 = $1035
Your capital = your 12 months payment = $3300
Your ROI in 1 year = $1035/$3300 = 31.4%

So now you know why some asb loan investors are completely OK with this divident.

You can terminate after 1, 2, or whatever year you choose. If you do the math, assuming the loan payment for subsequent years will be paid by divident from the previous year, your effective annual roi will slowly go down. Which means, if you terminate after, say, 3 years, you might get an effective annual roi of ~25% (this is effective annual roi, the actual 3-yr roi will be ~3x that) and that is still very high. Using the divident to pay off your loan will maintain your 'capital' only at 3300 from that first year.

So yes, the asb loan roi maximization will be realized AFTER you terminate the loan. The beauty of it is you can choose whenever to terminate in any year in any month and get that high return. This allows you to 'bail out' if interest rate gets too high and after doing the math you felt like it's not worth it.

And you might think this is too good to be true, but it is true. The risks would involve both the divident and interest rates (and your DSR). And also, PNB can at any moment start disallowing new asb loan, so it's not like you can continously do this loan-terminate-reapply forever, even though we hope we can actually do it forever

And as others had mentioned, buying the asb-rta will reduce your roi but you will get protection. For my case, i'm not buying asb loan for protection, but for roi maximization.

I largely agree with what you said, except for the part when you said 2% is not too much. If a married couple each has 200k, 2% of 400k a year = rm8k a year is actually quite a lot.

Buy you are right, once you have gotten your return, you can get more return by investing in property (that's what i plan to do this year), but one must remember property investment takes a lot of effort (and risk), asb loan is very rffortless as long as you understand the benefit/risk.